The healthcare industry and the financing industry undergo constant changes. New options for financing are constantly emerging and this can make choosing the best financial option for your healthcare business a little confusing. What makes the healthcare industry special is the constant cash flow that it faces, and the immediate and constant financing it may require to keep it running. So while some financing options may be ideal for other small businesses, it doesn’t need to necessarily apply for your healthcare business
Traditional Financing: This is perhaps the first type of financing that was ever offered. Any loan or financing option given by a bank or any other “traditional” money-lending institution, is known as traditional financing. While the overall costs of traditional financing can be low, more than 80% of businesses struggle to get this type of loan. Additionally, traditional financing requires several kinds of fees such as processing and application fees. To get an approval for traditional financing requires passing through several regulated application rounds and stringent questions. A traditional financing option can take even months until it reaches your bank, and you must have a stellar business plan to get approval. As the owner of a healthcare business, you may not be able to afford the time to go through the application process and may require funds right away.
Government Lending: Similar to the financing option given by banks and institutions, the government also offers to finance small businesses. However, to qualify can prove more difficult than traditional financing. You will have to create a loan package with a lender qualifying for a government guarantee. The government also provides grants to certain industries, like NGOs in medicine, technology developments, and related fields.
SBA Loans: A quick google search for small business financing options and this would be the first to pop up. The Small Business Administration provides loans and financing for small businesses to promote their growth in the US. The SBA provides loans at the bank rate and requires a year or more of bank statements to do so. Since loans from the SBA are especially rare to get and need a great credit score, having a seal of approval from the SBA can look great for other future lenders. Unfortunately, without a good credit score or business plan, it can be especially difficult to get approval for an SBA loan.
Business Line of Credit: A business line of credit works a lot as a credit card does. You can withdraw cash whenever you need it, but for the cash that you take you are charged interest. For instance, if your healthcare business is inventory-heavy, a business line of credit may be a good option for your continuous expenses. However, if by the end of the month you’ve not paid off the money and interest, you won’t be given the continuous access to funds until you’ve repaid.
Merchant Cash Advance: This financing option is very similar to a business line of credit, except that rather than paying cash back, the merchant cash advance will take a percentage of your future sales instead. One drawback to this may be that with a boost of your healthcare sales, you may have to give away more of your profits than you expected.
Short-term Financing: Short-term financing is the shortcut to instant cash and is deposited to your bank account in a matter of days. Short-term lending doesn’t boast of lower costs, but it is the best way to obtain financing in case your business hasn’t been around for too long or built a good credit score. Most short-term financing options won’t ask more than even three months of bank statements. To understand why short-term financing can be the best option for your healthcare business, it’s important you read this.
The best financing option for your business ultimately depends on your business goals. Do a careful study of your future business plans before seeking out the best option for your healthcare business. If you’d like a more thorough understanding of the various financing options, download our free ebook on financing options for small businesses.